China’s massive auto market hit the brakes last year as trade tensions and a softening economy dampened consumer confidence, but one segment soared on account of increasing internet penetration — used car sales.

New passenger car sales fell to 23.7 million last year, representing a 4.1 year-over-year drop according to a new report by China’s Association of Automobile Manufacturers, the country’s top auto association. That marks the very first annual decline in the world’s biggest car market since the 1990s.

Factors - Play - US-China - Trade - War

A few factors were at play. For one, the ****-for-tat US-China trade war has led to a slew of tariff on US car imports and weighed on consumers. The standoff prompted Tesla to cut prices for Model 3 in China and Jaguar Land Rover to temporarily close a factory after sales plummeted in the country. Internally, China is coping with a cooling economy that has undermined consumer demand across a spectrum of sectors. Regulators have also rolled back a tax-cut scheme on smaller cars that began in 2017.

Despite the overall industry slowdown, electric and hybrid vehicles continued to enjoy a healthy growth rate at 61.7 percent to clock sales of 1.26 million new units. That comes as expected for China is aiming to cut carbon footprint and lead in the global alternative energy revolution by splurging on subsidies for both consumers and manufacturers. But stumbling blocks remain for the budding industry, such as a lack of charging stations. Beijing is also mulling subsidy cuts on EVs to temper overcapacity in the long term.